Social information: using the crowd to crowdfund a project

In figure 1 you can see the famous Cloud Gate of Chicago designed by Anish Kapoor, or as it is more commonly referred to ‘the Kidney Bean’ at the Millennium Park. I took this picture during my conferences-attending in Chicago and I was personally quite impressed by this picture. It looks really ‘arty’, doesn’t it? At first, I felt really foolish taking a picture of a giant bean while trying to maneuver the camera is such a way that you could see me in the reflection of the bean. You could also say that I felt uncertain if it was appropriate to be so self-centered. However, when I looked around I concluded that it was more than ok since everyone was doing it. In other words, the behavior of others decreased my uncertainty and I, therefore, felt more comfortable with my one behavior. Essentially, this is a very practical explanation of the effect of ‘social information’.

Figure 1

Social information is simply described as any information concerning the behaviour of other individuals and tells you about what is normal in a given situation. For example, think again about the situation of the Kidney Bean. The individuals around me were also taking selfies, which informed me that it was normal to do so. The Kidney Bean has served a nice example which will help us move onto the main theme of this blog: philanthropic crowdfunding. Philanthropic crowdfunding is a funding method that uses an online context, meaning that donors can make their donations online. Crowdfunding is more that this, but for now we will keep this description and explain it in more details below. Philanthropic crowdfunding is not as successful in assembling money as it should and could potentially be. My goal is that of using social information ton increase the success of philanthropic crowdfunding. I have opted to focus on one specific type of social information: the donation behaviour of previous donors.

Before I explain more about social information, I will first define what I mean with philanthropic crowdfunding. Philanthropic crowdfunding is a way of assembling money online using an open call, meaning that anyone can make a donation. Crowdfunding builds on a large group of individuals, who each make a small donation, ultimately contributing to assembling a larger amount. If you make a donation at a philanthropic crowdfunding platform like Voordekunst, you will not receive a financial return. However, you might receive a small token of appreciation, but the value of the token is smaller than your donation. Meaning that you give more (in money terms) than you receive. In other words: it is philanthropic. But ultimately, can we increase the donations by adding social information?

I would like to live-test my idea with you! So, let’s see how you would react to social information on the donation behaviour of previous donors. Please imagine the following situation: after looking at my inspiring picture and description of the Kidney Bean art sculpture you are persuaded to make a donation to an art project. You have heard about a site called Voordekunst, which assembles money for art projects. On this site you find an interesting art project and start reading the project description.

You notice that the project’s information mentions that the average donation amount of this project is 80 euros (depicted in figure 2). Based on previous research, (e.g. Shang & Croson, 2009, Martin & Randal, 2008) we expect you to increase your donation amount, to more closely resemble the social information the website has provided you with (mention of 80 euros). What do you think, would you be persuaded by the crowd? Be honest, would you have changed your donation amount?

By using social information I would then use the social power of the crowd to increase the success of crowdfunding. Researchers have also found that if you are a woman you are likely to be more influenced by social information, while men are less affected (Klinowski, 2015). Additionally, if you are a new donor you are also more likely to be affected by social information (Shang & Croson, 2009), since they are assumed to be more uncertain about the amount they should/would donate. However, the effect of social information is not unlimited. What I mean by this is that if the amount mentioned (in our example it was 80 euros) is too high (for example 300 euros), you would most likely not be influenced by this amount (Croson & Shang, 2013; Shang & Croson, 2006).

To sum it up, I want to use social information to increase the donations individuals donate at a philanthropic crowdfunding platform. I expect that confronting (potential) donors with the donation behaviour of previous donors increases the success of crowdfunding projects.

What do you think, is adding such a small amount of extra information enough to increase one’s donation amount?

___________Claire van van Teunenbroek MSc is a PhD Candidate at the Department of Organization Sciences and works closely together with the Department of Philanthropy. Her research project is about developing and testing multiple techniques to increase the success of philanthropic crowdfunding.

References

Croson, R., & Shang, J. (2013). Limits of the effect of social information on the voluntary provision of public goods: Evidence from field experiments. Economic Inquiry, 51(1), 473–477. doi:10.1111/j.1465-7295.2012.00468.x